2013 (5) TMI 14 - AT - Income Tax

Disallowance under section 40(a)(ia) - Non dedction of TDS - whether the contract need be written and oral contract? - CIT(A) deleted the addition - Held that - AO has not given any finding of fact as to whether these payments are pursuant to a contract between the appellant and these parties. The assessee argued and submitted that no written or oral contract is made with these parties therefore, the provisions of section 194C are not attracted at all. Besides this, the labour charges includes the major chunk of purchases also. Therefore, in the absence of clear finding of fact, it cannot be presumed that the payments to first five parties are made in pursuance of a contract between the contractor and the appellant. In favour of assessee. Difference in capital a/c - CIT(A) deleted the addition - Held that - Force in the arguments of assessee that there cannot be made any addition because only the balance was reflected in the firms capital a/c whereas in the proprietary capital account two separate entries shown. These copies were furnished by appellant during the course of assessment proceedings too. Hence explanation furnished by the appellant is correct and the mistakes are bonafide and feasible one. Thus, the impugned addition is deleted in view of the facts and circumstances of the instant case. In favour of assessee. Addition on account of alleged unexplained cash credit - Held that - It was submitted before the CIT (A) that the amount of Rs.2.50 lakhs was part of the amount taken from the proprietary concern on which AO had already made the addition (Ground No.2) and further capital a/c shows opening balance of Rs.6,54,618. It was also further submitted that assessee has discharged its onus and AO on a misconception made the addition.In favour of assessee. Addition on loan - Held that - Credit does not pertain to the year and there is no cessation of liabilities during the year so as to bring the amounts under the provisions of section 41(1). The Revenue has not made out any case why the same is taxable as income. Appeal of Revenue dismissed.

Summary

Issues involved:
1. Disallowance under section 40(a)(ia)
2. Deletion of amount on account of difference in capital a/c
3. Addition on account of alleged unexplained cash credit under section 68
4. Addition of Rs.50,000 as unexplained cash credit

Detailed Analysis:
1. Disallowance under section 40(a)(ia):
The Revenue appealed against the CIT (A)'s orders regarding disallowance under section 40(a)(ia) amounting to Rs.7,73,462. The AO disallowed the amount as TDS was not deducted on contractual payments. The CIT (A) deleted a portion of the disallowance after considering the explanation provided by the assessee. The CIT (A) held that TDS was not required as there was no clear evidence of a contract between the parties involved. The impugned addition was reduced based on the CIT (A)'s findings, considering both facts and law. The Tribunal rejected the Revenue's appeal, upholding the CIT (A)'s decision.

2. Deletion of amount on account of difference in capital a/c:
The second issue pertained to the deletion of Rs.2,50,000 due to a difference in capital accounts. The AO had taxed this amount, but the CIT (A) deleted it after the assessee explained that the difference arose due to a loan from a proprietary concern. The CIT (A) accepted the explanation provided by the assessee, stating that the addition was not justified based on the facts and circumstances of the case. The Tribunal upheld the CIT (A)'s decision, finding no reason to differ.

3. Addition on account of alleged unexplained cash credit under section 68:
The third issue involved an addition of Rs.2,98,582 as unexplained cash credit under section 68. The AO added this amount after questioning the source of funds infused into the bank account. The CIT (A) deleted the addition after the assessee clarified that the amount was part of a loan from a proprietary concern, which had already been addressed under a separate ground. The Tribunal agreed with the CIT (A)'s decision, noting that the amount had been explained and there was no need for further addition.

4. Addition of Rs.50,000 as unexplained cash credit:
The final issue concerned the addition of Rs.50,000 as unexplained cash credit due to discrepancies in loan confirmations. The CIT (A) deleted this addition, emphasizing that there was no justification for treating the amount as taxable income under section 41(1). The Tribunal upheld the CIT (A)'s decision, stating that there was no cessation of liabilities during the year to warrant the addition. The Tribunal also noted that the Revenue's focus on Rule 46A violations was unfounded, as no additional evidence had been admitted by the CIT (A). Ultimately, the Tribunal dismissed the Revenue's appeal, affirming the CIT (A)'s orders on all grounds.